Will Europe’s Feckless Politicians Destroy the Euro?

Unfortunately, Europe’s despicable political class has not learned from their mistakes. They are not taking the simple and obvious steps that are needed to address the problems of spendthrift governments.

Instead, they want to compound bad fiscal policy with bad monetary policy by having the European Central Bank purchase even more bonds issued by the continent’s most decrepit welfare states.

Only weeks into his new job as president of the European Central Bank, the Italian is being portrayed along with German Chancellor Angela Merkel as the main—the only—obstacle to saving the euro zone. If only the ECB would print a few trillion euros to buy the debt of spendthrift European countries, all will be well. Hang in there, Mr. Draghi, and you too, Chancellor. Don’t let the French, the British and the Yanks, the euro-pundits and the other blabbering bullies for bailouts get you down. Someone needs to defend the principle of central bank independence and price stability. The ECB has been by far the most effective part of the euro system since its founding. It shouldn’t squander that legacy now by taking on the debts of spendthrift governments that are the real cause of this crisis. It’s true that the ECB has already become a little bit pregnant in buying sovereign bonds, first taking on Greek, Irish and Portuguese debt, and this summer Spanish and Italian bonds. A week ago Friday, the ECB held €187 billion worth of country bonds. …So far, the ECB’s bond purchases have been limited enough that the central bank has been able to “sterilize” them, meaning they are offset by withdrawing money elsewhere in the banking system and haven’t added to the overall supply of money. But a multitrillion euro program would make sterilization impossible and would become a money-printing exercise. …If the Germans and ECB do write a blank check, then the balance of power within the euro zone will shift markedly, and perhaps irreversibly, in favor of the spenders. Even if this prevented short-term panic, it would merely postpone the day of reckoning and leave Europe worse off in the medium and long term. Without a system that can enforce spending restraint, borrowing discipline and economic reform, all the ECB bond-buying in the world won’t save the euro, and the independence of the ECB itself will become another casualty of the crisis.

The mess in Europe is like a slow-motion train wreck. It’s easy to see it won’t work, but that doesn’t stop the politicians from doing the wrong thing.

14 Responses

Collapse of Europe is just collateral damage in the quest to take down the US. Greece is taking FOREVER to die. Needed something quicker. Add Italy to the pile by taking out the country that had been supplying 28% of Italy’s oil, Libya.
The sooner the EU collapses the sooner the US is dragged down with it with all of the overcommitted funds, bailoiuts, and giveaways that our country has been locked into. The IMF. AIG. All of the derivatives that come due that are WAY bigger than we have resouces to pay. A plan to gut the free capital of the US and most of its financial institutions at the same time.

With further political integration (still holding significant momentum) the spendthrift will outvote the producers. The real crisis in Europe will begin when Germans at the margin start finally quitting. Meanwhile three billion people in the emerging world continue to apply pressure on the suicidal continent.

Europe is now living through the middle chapters from the gospel of HopeNChange. It is the soviet union of our times. Declining under welfare state incentives? Redouble your efforts at redistribution, augmenting intra-national welfare with cross-national redistribution. The dream lives on…

Just put the numbers together. Half the EU’s population lives in countries in trouble whose populations overwhelmingly support cross national redistribution. Join forces with some of the useful idiots from the north and you see the juggernaut facing productive people in Europe. Once you’re in that situation you cannot come out. Hitting bottom provides the only eventual salvation. Alas, Americans, you’ve already stepped on that banana peel. Now you hope that Romney or Gingrich may be elected so that the decline may be slower. The righting is on the wall…

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[…] spending, yet many of the continent’s politicians want the European Central Bank to purchase the dodgy debt of reckless welfare states such as Spain, Italy, Greece, and Portugal in order to prop up these big government […]

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[…] ideological belief in centralization (and a desire to bail out their big banks), instead decided to undermine the euro by creating a bigger mess in Greece and sending a very bad signal about bailouts to other welfare […]